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Question: I’m 27 and looking to build my investment portfolio. Is this something I should hire a financial planner for? (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
Answer: There is no one “right” answer to this question: While there’s a wealth of information available to help you educate yourself on investing and there are many platforms that can accommodate individual investors, it’s not for everyone. “If you don’t think you can take the time to learn, develop a plan, stick to it, monitor investments and continue to contribute,” you’d likely benefit from professional help, says certified financial planner Don Grant of Carey, Thomas, Hoover and Breault. It also “depends on whether you want to take the time to learn about the capital markets and how investing can affect your wealth,” he adds.
On the flip side, you likely don’t need a financial professional if you already have a strategic plan in place. “A financial plan covers topics such as retirement planning, debt management, tax planning and estate planning,” says certified financial planner Danielle Miura of Spark Financials. Podcasts like “How to Money,” “Stacking Benjamins” and “So Money” can be educational, as can books like “The Little Book of Common Sense Investing,” by John C. Bogle, “The Intelligent Investor,” by Benjamin Graham and “I will Teach You To Be Rich,” by Ramit Sethi.
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But “if you need help creating a financial plan, then you probably need to work with a financial professional,” she adds. An advice-only financial planner might be a good fit for you if you want financial advice but don’t want ongoing management of your investments. This way, you can choose your investments and build a portfolio yourself, however an adviser can make the process easier with minimal mistakes. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
An advice-only adviser often charges an annual, monthly or quarterly amount, and Lauren Lindsay, certified financial planner at Beacon Financial Planning, for example, charges $5,000 annually, billed quarterly, for full financial planning but no money management.
If you want help with all of it — a plan and ongoing management, you’re probably best served by one of two models: assets under management (AUM) or flat-fee. “A flat fee works best for clients who believe that the value of financial advice and investment management is not perfectly correlated with the portfolio balance,” says certified financial planner Cody Garrett at Measure Twice Financial. On the other hand, the 1% AUM fee is reasonable for clients with smaller account balances between $250,000 and $1 million dollars, but most advisers require account minimums and turn away prospective clients who don’t help the firm maintain profitability.
Should you go the pro route, Brent Weiss, certified financial planner and co-founder of Facet Wealth, says it’s important to keep in mind that not all financial advisers are created equally and the title “financial adviser” tells you nothing about the person’s education, experience, the services they offer or how they charge. “Traditional or old-school financial advice focuses on only two things, investment and retirement. While those are both important topics to address, there’s so much more that you will want advice and guidance on today and in the future, plus, traditional financial advisers offer limited advice and still charge exorbitant fees of 1% or more on what you invest with them,” says Weiss. (Looking for a new financial adviser too? This tool can help match you with an adviser who might meet your needs.)
Another option for someone like you: Using an automated, online financial adviser might be an attractive option. Betterment, E*Trade, Merrill Guided Investing and Wealthfront are just a few of the robo-advisers available at a fraction of the cost of a traditional adviser. “Online financial advisers are typically a less expensive way to get financial advising services, which often have straightforward pricing models without transaction charges or hidden fees and typically focus on a limited stock and bond portfolio to limit complexity,” says Stiger. The added benefit of online advisers being automated is that services can automatically rebalance portfolios, reinvest dividends and reduce risk, with little to no interaction from the investor.
And always remember this: Financial planning is about so much more than just your investments. “Think about what matters to you. Personal growth, career growth, being more intentional with your money, paying off debt, getting married, raising a healthy family, buying a home or maybe just alleviating the worry and stress that so often surrounds money. Navigating life and all of its chaotic moments with a sense of calm and having clarity around what truly matters to you will help you make financial decisions with confidence,” says Weiss.
Have an issue with your financial adviser or looking to hire a new one? Email pi***@ma*********.com.
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Thinking about hiring a financial adviser or have an issue with your current one? Email pi***@ma*********.com.
Alisa Wolfson is a reporter for MarketWatch Picks.
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